March 11, 1997
DAR OPINION NO. 21-97
Mr. Rogelio M. Chaves
Provincial Agrarian Reform Officer
Talavera, Nueva Ecija
Dear PARO Chaves:
This has reference to your letter seeking opinion/clarification relative to the implementation of DAR Administrative Order No. 08, Series of 1995. Specifically, you wish to be clarified on the following issues, to wit:
a) The subsequent issuance of Torrens Title by the Land Registration Authority (LRA) after the landholding has been issued EP/CLOA by the Department of Agrarian Reform will cause difficulty in monitoring land productivity and succeeding transfers; and
b) The absence of clear and categorical statement as to who will shoulder Capital Gains Tax after the issuance of EP/CLOA might be taken advantaged of by unscrupulous individuals.
Anent your first query, the subsequent issuance of Transfer Certificate of Title (TCT) for lands covered by EP/CLOA by the Land Registration Authority (LRA) transferred by an awardee to a transferee under P.D. No. 27 and R.A. 6657 does not in any way pose difficulty in the monitoring of land productivity. The aforementioned Administrative Order specifically provides under No. 2 of its Policy statement that although the transfer of awarded land is allowed, the productivity of the subject land shall be maintained and any change in the nature of its use will not be allowed except with the approval of the DAR under its rules an conversion or exemption. Consistent with the government's policy to preserve prime agricultural lands, irrigated or irrigable lands under A.O. No. 20, Series of 1992 of the Office of the President shall be non-negotiable for conversion. The non-negotiability shall be annotated at the back of the Transfer Certificate of Title by the Register of Deeds.
Anent your second query, the liability for payment of Capital Gains Tax depends on whether or not the transaction is agrarian related. While Section 66 of R.A. No. 6657 categorically exempts transactions under CARP involving transfer of ownership whether for natural or Juridical persons from Capital Gains Tax, the same is not absolute. Obviously, what is contemplated under Section 66 of R.A. No. 6657 are those transactions which are necessary for the issuance of EP/CLOA in favor of farmer-beneficiaries.
Thus, the aforecited exemption does not hold true in transactions which are no longer agrarian related. In this connection, the sale or disposition of awarded lands from the awardee to third persons is no longer exempt from Capital Gains Tax, although said transfer is allowed under DAR Administrative Order No. 08, Series of 1995, because then it ceases to be an agrarian related matter. To hold otherwise, would in effect exempt all transactions from payment of Capital Gains Tax.
We hope to have clarified matters with you.
Very truly yours,
(SGD.) ARTEMIO A. ADASA, JR.
Undersecretary for Legal Affairs, and Policy and Planning